Business
Saudi Arabia's influence on oil price volatility to decline
Washington, March 28
With Saudi Arabia moving
beyond its long-held role as a simple exporter of crude oil and
reshaping itself as a supplier of refined petroleum products, the
kingdom will be less able to influence prices and balance global oil
markets, a study says.
The paper, published in the journal Energy
Policy, examined the growth of Saudi refining, the country's increased
domestic demand for crude oil and the geopolitical effects of this
development.
"This is the type of change we expect to see as a
state moves to a more advanced stage of development," said study author
Jim Krane from the Baker Institute for Public Policy, Rice University in
the US.
There are plenty of upsides from investing in refining,
including reducing the kingdom's reliance on fuel imports and capturing
margins now lost to the competition, Krane explained.
"Refining
also allows the Saudis to export their heavy crude oil to a wider array
of customers, beyond the select few importers who have invested in
configurations that can handle heavy crudes," he pointed out.
However,
there are also downsides, starting with an erosion of Saudi Arabia's
traditional role as the global "swing supplier" of crude oil.
With
more oil production diverted into refining, the kingdom, which has
provided some protection against volatility, will have reduced
flexibility to "swing" oil production alongside fluctuations in global
price and demand, the study noted.